I need a little advice. I am stuck in the situation where I have just refinanced my 3 Investment properties( Australia ) and have maxed out my borrowing potential. As I have refinanced using Interest Only loans, I cannot expect equity to build up in the short term to allow me to use it to fund new properties. I get disheartened when I read of people who can afford X amount of Properties in X amount of months and wonder how to be able to do it myself. As an expatriate, I have the choice of Borrowing in Australia at rates of 8% or thereabouts, or doing what I have done now, and borrow in Foreign currencies at substantially lower rates. I therefore am getting good returns on all my properties however to purchase new properties from Overseas, I need 30 % Deposits.
Do I just be patient and wait until I have enough saved up, or is there another way?
I know it takes time but I dont want to work forever!!
FidelThere was a bit of discussion just the other day about “how do these people buy so many in so little time?”
Those scenarios aren’t happening now I would suspect.
Here’s how it happens:
– during a boom,
– in places where the properties are very cheap – under $100k ,
– the rent returns are up around 10% (or more),
– the people are probably earning a good quid to start with,
– they renovate and add value in a rising market,
– rent increases due to the increased value of the property.
– use rapidly growing equity to fund purchases.Don’t feel bad because you can’t do it right now. You can only do what you can do, but examining your investing system to make sure you are maximising every step of the process will help.
Cheers,
Marc.
[email protected]“we get sent lemons; it’s up to us to make lemonade”
This happens all the time. Infact most investors can only ever afford 2 properties because they negetive gear and simply don’t have the cash to go in any more.
You often hear stories of agents who also invest and in just a year or two they have large numbers of properties. When I look into most of them I found their income is collosally huge. Like they will sell 4 or 5 houses a month and get $10,000 commision on each one. Some of them are stedily making $30,000+ after all expenses per month. On this sort of wage they are lent 1.5million straight up and they can obviously break that down to many houses.
I don’t know where you have been looking but 8% is a bad rate at the moment. This might be something to look at. Getting a rate of 7% might just save you about $40 per week on payments on each property.
Probably the best thing to do is not do interest only. Get the amount owing down so you do build equity, remember this can only help you. If you pay off some capital you reduce your interest and get it all back anyway. The result will be in a few years you should have much better equity and much lower interest payments.
Thanks for the replies…. I have gone Interest only because I solely desire an Income stream in addition to my current job which I will not do forever. The Interest rate I am paying is 1.6% on one property and 3.5 % on my other two IP’s. ( Foreign Currencies). So I do not really care if they are paid off but I need to consider this if I want to move ahead quicker, and as a P and I loan only pays off Interest mainly for the first few years, the repayments should be similar, right? I should just be patient and sit on my hands for a while, but we all know, the boat is always sailing!!!!!
Hi Fidel,
I’m just a beginner but here is what I’d do (I think 30% deposit is too much):
Situation 1: not enough equity, enough cashflow:
– either wait for equity to build up (maybe 6 months and then revalue)
– or add value by small and cheap renovations paid for with your salary and revalue then (paint etc.)
– or get a 95% loan (sure with mortgage insurance but hey, that’s another growing property)
– the more properties – the faster you’d build up equity (I mean the growth percentage should be the same, the absolute amounts would be greater)
– and you’re right, I wouldn’t go P&I because on the short term (1-2 years) you won’t be able to increase your equity by that much. Try to manufacture your own capital growth instead.Situation 2: not enough cashflow, enough equity:
– get a low/no doc loan
– get an extra line of credit for an amount that would cover the difference between rents and outgoings (interest, rates) for the house for say, the next 5 years. Ater that, the rent should have increased enough to cover those expenses. Example: if you have to pay 150$ per week extra (i.e. interest + other expenses – rent=150$), get 39k. As you use it you pay interest on that but hopefully your property will grow much faster. Also 39k is a bold projection because you will increase the rent gradually and the 150$ per week extra will become less and less.Situation 3: not enough from both:
– minimize your expenses
– get a raise / another job
– go to situation 1
– read books on creative financingCheers,
Emil
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